20-F: MicroAlgo Reports 2025 Financials Amid Share Reorganizations

MicroAlgo Inc. reported a significant increase in net income for 2025 to $18.1 million, despite a 22.1% revenue decline, while navigating multiple share consolidations and a dual-class structure.

Summary

• Total revenues for the year ended December 31, 2025, were RMB 422.0 million (USD 60.0 million), a 22.1% decrease from RMB 541.5 million in 2024.
• Net income for 2025 increased significantly to RMB 127.6 million (USD 18.1 million), up 143.5% from RMB 52.4 million in 2024.
• Net income attributable to MicroAlgo Inc. was RMB 113.9 million (USD 16.2 million) for 2025, compared to RMB 38.6 million in 2024.
• Research and development expenses decreased by 43.3% to RMB 63.3 million (USD 9.0 million) in 2025 from RMB 111.7 million in 2024, attributed to project completion and adequate R&D technology.
• Other income, net, sharply increased by 193.0% to RMB 112.5 million (USD 16.0 million) in 2025, primarily due to a rise in investment income from RMB 12.4 million to RMB 132.3 million (USD 18.8 million).
• The company completed multiple share consolidations in March 2024 (1-for-10), December 2024 (1-for-20), and July 2025 (1-for-30), and established a dual-class share structure in November 2024.
• As of December 31, 2025, 10,941,519 Class A Ordinary shares and 1,495,942 Class B Ordinary shares were outstanding, with Class B shares holding 20 votes each.
• Cash and cash equivalents increased to RMB 1,229.0 million (USD 174.8 million) by December 31, 2025.
• Working capital was approximately RMB 2,351.9 million (USD 334.6 million) as of December 31, 2025.
• All convertible notes payable, including those issued to parent company WiMi Hologram Cloud Inc. totaling $45 million, were converted into shares by December 31, 2025.

Sentiment

Score: 6

Explanation: StockSavvy.ai views this filing with cautious optimism. While the significant increase in net income and strong liquidity are positive, the substantial revenue decline and ongoing risks related to Nasdaq listing compliance and high customer/vendor concentration warrant careful monitoring. The strategic R&D and market expansion plans are promising but face execution and regulatory uncertainties.

Positives

• Net income increased significantly by 143.5% to RMB 127.6 million (USD 18.1 million) in 2025.
• Other income, net, saw a substantial increase of 193.0% in 2025, driven by a sharp rise in investment income.
• Cash and cash equivalents grew to RMB 1,229.0 million (USD 174.8 million) by year-end 2025, indicating strong liquidity.
• Working capital remained robust at RMB 2,351.9 million (USD 334.6 million) as of December 31, 2025.
• The company holds a significant intellectual property portfolio with 628 proprietary rights, including 87 patents and 485 software copyrights, reinforcing its market leader position in technology.
• Strategic focus on expanding central processing algorithm solutions to diverse industries like government cloud computing, manufacturing, financial technology, medical cloud, smart transportation, PaaS 3D, and SAAS marketing.
• Successful conversion of all convertible notes payable into shares by December 31, 2025, reducing debt obligations.

Negatives

• Total revenues decreased by 22.1% from RMB 541.5 million in 2024 to RMB 422.0 million (USD 60.0 million) in 2025, primarily due to global economic uncertainty leading to conservative corporate marketing budgets.
• High customer concentration risk, with three largest customers accounting for 41.5% of total revenues and 67.1% of accounts receivable in 2025.
• High vendor concentration risk, with three largest vendors accounting for 49.0% of total purchases and five largest vendors accounting for 92.7% of accounts payable in 2025.
• Identified material weaknesses in internal control over financial reporting, including insufficient financial reporting and accounting personnel with U.S. GAAP understanding, and weaknesses in information technology general control (ITGC).
• The company does not maintain insurance policies covering damages to its IT systems, business interruption, general third-party liability, product liability, or key-man insurance.
• Loss from bad debt of RMB 17.2 million (USD 2.4 million) recognized in 2025 from subsidiaries.

Risks

• Operating in a relatively new and rapidly evolving market with few proven methods for projecting customer demand or industry standards.
• Intense competition, new industry standards, limited barriers to entry, disruptive technology developments, short product life cycles, and customer price sensitivity.
• Limited operating history and potential inability to sustain rapid growth, effectively manage growth, or implement business strategies.
• Difficulties in integrating recent acquisitions, which could disrupt business, dilute shareholder value, and strain resources.
• Failure to maintain adequate financial, information technology, and management processes and controls, leading to material weaknesses and errors in financial reporting.
• Inability to keep up with industry trends, technological developments, or to develop, acquire, market, and offer new products and services.
• Insufficient pricing for services and solutions, potentially harming revenues and profitability.
• Significant investments in research and development may not achieve expected returns.
• Requirement for significant capital to fund R&D investments, with uncertainty in obtaining sufficient capital on favorable terms.
• Dependence on attracting, hiring, retaining, and motivating key management personnel and highly skilled employees.
• Negative media coverage could adversely affect brand recognition and business.
• Failure to protect intellectual property rights or potential infringement upon the intellectual property rights of others.
• Inability to protect source code from copying if there is an unauthorized disclosure.
• Third parties registering similar trademarks or domain names, or misappropriating data, causing confusion or harm to reputation.
• High dependence on the proper functioning and improvement of information technology systems and infrastructure, vulnerable to disruptions.
• Reliance on the performance of China's Internet infrastructure and fixed telecommunications networks, which may experience failures or security breaches.
• Disruption to third-party services and technologies used in business operations.
• Insurance policies may not provide adequate coverage for all claims.
• Exposure to claims, disputes, or legal proceedings in the ordinary course of business.
• Being a controlled company under Nasdaq rules, allowing reliance on exemptions from certain corporate governance requirements.
• Dual-class voting structure concentrating voting control with Class B Ordinary Shares holders, limiting influence of other investors.
• Business may be materially and adversely affected by natural disasters, health epidemics, or similar situations.
• Complexity, uncertainties, and changes in PRC regulation of the Internet industry and companies, including foreign ownership and licensing requirements.
• Compliance with PRC cybersecurity laws and regulations, which are rapidly evolving and stringent, potentially creating unexpected costs or restricting business.
• Liability for improper use or appropriation of personal information provided by customers or end users.
• Substantial uncertainties regarding the enactment timetable, interpretation, and implementation of PRC Foreign Investment Law.
• Risks associated with company chops (seals) of PRC subsidiaries not being kept safely, stolen, or used by unauthorized persons.
• Substantial influence of the PRC government over business activities, including potential future requirements for approval to list on U.S. exchanges.
• Strict filing procedures with the CSRC for future offshore capital-raising activities and material corporate events, with potential penalties for non-compliance.
• Adverse changes in China's economic, political, or social conditions or government policies.
• Severe or prolonged downturn in the PRC or global economy and political tensions between the United States and China.
• Additional and more stringent criteria applied to emerging market companies by SEC and PCAOB, potentially leading to delisting under the HFCA Act.
• Uncertainties in the promulgation, interpretation, and enforcement of PRC laws and regulations.
• Potential classification as a PRC resident enterprise for tax purposes, resulting in unfavorable tax consequences.
• Inability to obtain certain benefits under relevant tax treaties on dividends paid by PRC subsidiaries through Hong Kong subsidiaries.
• Uncertainty with respect to indirect transfers of equity interests in PRC resident enterprises by non-PRC holding companies.
• Difficulty in enforcing certain judgments obtained against the company by shareholders due to Cayman Islands and China laws.
• Adverse effects from the enforcement of the PRC Labor Contract Law and other labor-related regulations.
• M&A Rules and other PRC regulations making it more difficult to pursue growth through acquisitions.
• PRC regulations relating to offshore investment activities by PRC residents limiting PRC subsidiaries' ability to increase capital or distribute profits.
• PRC regulation of loans to and direct investment in PRC entities by offshore holding companies and governmental control of currency conversion.
• Restrictions on PRC subsidiaries paying dividends or making other payments to the holding company.
• Fluctuations in exchange rates affecting results of operations and investment value.
• Governmental control of currency conversion limiting ability to utilize revenues effectively.
• Failure to comply with PRC regulations regarding registration requirements for employee stock ownership plans or share option plans.
• Defective leased property interests and potential challenges to lease rights.
• Volatility in the market price for Class A Ordinary shares.
• Key Projected Financial Metrics are subject to significant risks, assumptions, estimates, and uncertainties.
• Inability to obtain additional financing to fund operations or growth.
• Potential for securities litigation.
• Sale or availability for sale of substantial amounts of Class A Ordinary shares could adversely affect market price.
• Lack of research or inaccurate/unfavorable research by securities or industry analysts could cause stock price and trading volume to decline.
• Ability to redeem unexpired warrants prior to their exercise at a disadvantageous time, making them worthless.
• Inability to satisfy Nasdaq listing requirements, particularly new rules regarding reverse stock splits and bid price, leading to delisting.
• Being an emerging growth company and taking advantage of exemptions from disclosure requirements, potentially making securities less attractive.
• Potential classification as a Passive Foreign Investment Company (PFIC), resulting in adverse U.S. federal income tax consequences to U.S. Holders.

Future Outlook

The company plans to continue strengthening its central processing algorithm solutions for core internet advertisement customers, increase investments in R&D for emerging technologies like quantum computing, AI, and 5G, and expand applications into new industries such as government cloud computing, manufacturing, financial technology, medical cloud, smart transportation, PaaS 3D, and SAAS marketing. It also intends to pursue strategic acquisitions and collaborations to enhance market position and operational efficiency, while focusing on brand building.

Management Comments

• "Our goal to stay at the forefront of technological development and fixation on research and development has driven us to build an exceptional research and development team."
• "We believe that our future success depends on our continued ability to attract, hire, retain and motivate qualified and skilled employees, as they are critical in improving our infrastructure and technologies and optimizing our operations."
• "We will continue to strengthen our central processing algorithm solutions for our core customers in internet advertisement to ensure a steady revenue stream."
• "We endeavor to increase investments in research and development to improve upon our research and development platform, retain talented individuals in the field of central processing algorithm technology, and strengthen the research and development for core technologies and products, intelligent chips algorithms and AI algorithms."
• "Currently, in response to the rapidly growing demands for large-scale data processing, the company keeps a close attention on the development trends of cutting-edge technologies such as quantum computing and conducts fundamental technological research to make necessary preparations for future technological evolution."
• "We will selectively seek strategic acquisitions to enhance market position, integrate industrial chain resources, and maximize capital efficiency."
• "We will continue our focus on brand building to enhance our brand value."

Industry Context

StockSavvy.ai notes that MicroAlgo operates in the rapidly evolving central processing algorithm service industry in China, which is characterized by intense competition and continuous technological change. The company's strategy to diversify into government, finance, healthcare, manufacturing, and smart transportation aligns with broader trends of digital transformation and increasing demand for data processing and AI integration across various sectors. The emphasis on proprietary IP and R&D is crucial for maintaining a competitive edge in this dynamic market, especially with the rise of 5G, IoT, and cloud computing. However, the high customer and vendor concentration, coupled with stringent and evolving PRC regulations on data security and foreign investment, present significant operational and compliance challenges that are common for China-based tech companies.

Comparison to Industry Standards

• The filing does not provide specific comparisons to comparable companies, projects, or results within the industry. It states that the central processing algorithm service market is highly fragmented and evolving, and that the company believes it competes favorably based on factors like service features, customization, technology quality, R&D capabilities, and diversified customer base, but expects competition to intensify.

Corporate Governance

Legal Proceedings

• In April 2023, Joyous JD Limited and the Company filed suit in the New York Supreme Court New York County against Yolanda Asset Management Corporation, the sponsor of Venus Acquisition Corporation, alleging breach of agreements and misuse of Form S-4. The company is seeking damages, with the final outcome uncertain.

Related Party Transactions

• Amounts due to Parent Company (WiMi Hologram Cloud Inc.) are non-trade payables from advances and allocated shared expenses, unsecured, non-interest bearing, and payable on demand. No amounts were obtained from the Parent Company in 2025, and no repayments were made in 2025.
• During 2025, WiMi Hologram Cloud Inc. purchased convertible notes issued by the Company totaling $45,000,000 for a purchase price of $41,400,000. All these convertible notes were converted into shares by December 31, 2025.

Stakeholder Impact

• Shareholders: Experience dilution from convertible note conversions and face significant risks related to Nasdaq delisting due to multiple reverse stock splits and low bid price. The dual-class structure concentrates voting power, limiting influence for Class A shareholders. Potential for increased returns from higher net income and strategic growth, but also risks from revenue decline and regulatory uncertainties.
• Employees: The company's success depends on attracting and retaining skilled employees, with significant R&D investments. Compliance with PRC labor laws and social welfare contributions is ongoing. The Insider Trading Policy and Clawback Policy affect executive officers.
• Customers: Benefit from bespoke central processing algorithm solutions aimed at improving efficiency, reducing costs, and enhancing user satisfaction. Diversification into new industry verticals aims to expand service offerings. However, customer concentration risk remains a factor.
• Suppliers/Vendors: The company has high vendor concentration, meaning performance by a limited number of vendors is critical to operations and cash flows. Any underperformance could have a material adverse effect.
• Creditors: Convertible notes have been fully converted to equity, reducing debt obligations. Banking borrowings are short-term and secured, with plans for repayment by July 2026.

Next Steps

• Continue to strengthen central processing algorithm solutions for core internet advertisement customers.
• Increase investments in research and development for emerging technologies like quantum computing, AI, and 5G.
• Expand central processing algorithm solutions to cover more applications and industries, including government cloud computing, manufacturing, financial technology, medical cloud, smart transportation, PaaS 3D, and SAAS marketing.
• Selectively seek strategic acquisitions and business collaborations to enhance market position and operational efficiency.
• Continue focus on brand building and strategic positioning.
• Address material weaknesses in internal control over financial reporting, particularly regarding U.S. GAAP understanding and ITGC.
• Monitor and comply with evolving PRC regulations on data security, foreign investment, and overseas listings.
• Manage risks associated with Nasdaq listing requirements, especially the amended rules regarding reverse stock splits and bid price.

Key Dates

Recommendation

MicroAlgo Inc. presents a mixed financial picture. While the significant increase in net income and strong liquidity are positive indicators, the substantial decline in revenue and the ongoing, severe risks related to Nasdaq delisting due to multiple reverse stock splits and low bid price create considerable uncertainty. The company's strategic focus on R&D and market expansion is promising for long-term growth, but high customer and vendor concentration, coupled with evolving PRC regulatory scrutiny, pose material operational and compliance challenges. Given the current volatility and the immediate delisting risk under new Nasdaq rules, a 'hold' recommendation is appropriate. Investors should monitor the company's ability to maintain its Nasdaq listing, execute its growth strategies, and address internal control weaknesses before considering further investment.

Keywords

Central Processing Algorithms, Internet Advertisement, Intelligent Chips, AI, Cloud Computing, 5G, Data Processing, Software Development, SEC Filing, 20-F, Cayman Islands, PRC Regulation, Nasdaq Listing, Share Consolidation, Dual-Class Shares, Cybersecurity, Data Security, Financial Technology, Manufacturing Industry, Medical Cloud, Smart Transportation, PaaS 3D, SAAS Marketing